September 2      YUKOS reported that the Basmanny Court granted the Public Prosecutor General’s request to arrest the accounts of the company’s main subsidiaries. The company’s stock lost 1.5%.

September 4      The Federal Tax Service increased its tax claims against YUKOS for 2001 from $3.4 billion to $4.1 billion.
                           Eurasia Drilling Company was the only company that made a bid to acquire LUKoil-Burenie (LUKoil-Drilling).
                            UES’s Board of Directors voted to start dividing the company.

September 6       LUKoil announced a tender for the aborted sale of LUKoil-Burenie. However, a special commission recommended the drilling division go to Eurasia Drilling Company.
                              VTB reported that the company had reached an agreement with Promstroibank (St Petersburg) to purchase a majority stake in the bank.
September 7        The Federal Tax Service began to recover part of YUKOS’s back taxes to the tune of $2.7 billion. YUKOS released results for the first six months.
                             Andrei Gorodilov, First Vice-Governor of the Chukotka Autonomous District, made a statement saying that from 2001 to 2003 inclusive, Sibneft had been granted $1 billion  in tax breaks.

September 8       Sibneft published preliminary results for the first six months under US GAAP.
                             YUKOS announced plans to sell assets totaling $1-1.5 billion to repay its tax debt.

The last week brought no surprises to the foreign exchange market. Quotes froze at 29.22-29.23 rubles to the dollar with minimal trading. However, toward the end of the week, when short-term IBC rates dropped to 1%, the market saw some timid attempts to speculate on a stronger dollar, but they failed to have a considerable effect. An increase in ruble liquidity was largely offset by foreign currency sales.
A lull also hit the federal ruble bond market due to the stable exchange rate and banks’ payments to the Mandatory Reserve Fund. Inflation figures for August put significant pressure on the market by calling into question whether the state would meet its inflation target for this year. This resulted in volatility of the dollar exchange rate and in a more demanding attitude on the part of investors towards the yield of ruble instruments. A slight recovery could be observed but only on the primary market, which saw an additional placement of two OFZ issues. A mere third of one issue placed, while investors snapped up the other.
The rally on the corporate bond market in late August turned out to be a false start. The rather complicated situation with ruble liquidity nipped it in the bud, which came as a surprise. A primary floatation of Moscow bonds also affected the situation. The flotation was not quite market, as the bonds were mostly divided up among large investors’ portfolios with a minimum premium to the market. All this led to drastically lower interest among top-tier corporate bonds, while some demand for the second- and third-tier bonds could be observed.  Once liquidity is restored, the market will continue to grow. However, the important psychological moment when investors are ready to wake up from their late summer slumber has already passed.
Western investors began selling their Russian eurobonds after the terrorist acts in Moscow and North Ossetia. However, their yield increased slightly, as US securities were rising in price and thus providing support to Russian bonds. “Bears” became more active on the market by Tuesday due to a considerable rise in US Treasuries as economic growth in the US failed to meet expectations.
The stock market saw a moderate rise in prices with light trading. The RTS Index climbed to 600 for the first time in the last one and a half months. In terms of growth rates, UES took the lead, gaining 4.9% thanks to news about progress in energy industry reform. Among the blue chips, only YUKOS stock went into red, losing 6.3%.

The Financier’s Date Book

September 15     Placement of 5.2 billion rubles in federal bonds
September 16    Placement of 0.5 billion rubles in bonds by Bashkosrtostan.
                            The Central Bank places 50 billion rubles in bonds closed subscription.